Hi milank,

The prices of closed-end funds vary based on two factors: the underlying value of the fund's holdings (be they stocks, other funds, bonds, or commodities), and an additional "discount" or "premium" to this underlying value. Both elements vary a great deal.

With the recent extreme volatility, the so called "transparency" of a security's underlying assets has been valued more than usual. Partly because closed-end funds are often less transparent than their contents, many of them have been trading at an unusually steep discount to their underlying value. This can make them especially interesting bargains if you are a buyer, but especially frustrating holdings if you purchased them when they were more richly valued.

We at FiLife cannot speak to the likelihood that any particular security will retain its current dividend. We are not experts in these securities, and cannot give "financial advice" per se. Generally speaking, to the extent that many different issuers are having to cut dividends, it would not be unusual if these funds had to do so also. (It would also stand to reason that once economic conditions are more favorable, dividends might be raised again).

As for whether you should sell now and buy CDs, that depends a great deal on your current financial situation: your risk tolerance, the time frame in which you need the funds, the rest of your portfolio, etc. You would do well to consult a "fee only" financial planner to help advise you about this.

One question to honestly ask yourself is, why did I buy/do I own these funds in the first place? Has anything fundamental about you or your financial situation changed? If they made sense for you to purchase at higher values, then it may not make sense to sell them when are "on sale".

Generally speaking, I would not advise anyone to sell their stocks at this point unless they never should have been in stocks in the first place. But again, a qualified professional should be able to evaluate all your circumstances and give you specific advice that best fits those.

I hope this helps!

Hi Milank -

Thanks for the questions. I can't speak directly to these specific funds - but I can talk about what's going on in the closed-end fund world.

Many closed-end funds are suffering in our current financial environment. The Wall Street Journal reported last week that 90% of closed-end funds are trading at a discount.

Why? The structure of closed-end funds can make them sensitive to plunging markets. As you probably know, closed-end funds have a fixed number of shares that are traded on an exchange. The price of the shares depends on investor demand for them. For this reason, as investors grow skittish, and jump out of the markets by dumping shares, the prices of a closed-end fund shares can take a nose-dive. The prices will go down even if the value of the underlying value of the assets is better than the market reflects.

Now, this discount (the disparity between the share price and value of the holdings) might make closed-end funds look attractive, right? The experts always say you should buy at the bottom. Well, the Journal reports that these discounts might be more of a warning signal than a buying opportunity right now because the discounts are bigger and lasting longer than ever before.

As for whether its too late to sell and go to cash? A lot of smart people are scratching their heads and asking themselves that question. Have we hit bottom? Its hard to say. And its so hard to time the markets " especially now that weve come so low. You already missed jumping out at the right timewill you be able to jump back in at the right time? One things for sure: making two bad market-timing decisions will cost you more than making just one bad decision. You dont want to move to cash and then miss the market rebound.

I think its best to devise an asset allocation strategy that you believe in and matches your risk profile. Then stick to it through highs and lows. Unless of course, your gut, heart and mind all tell you that we are heading to an even darker place than weve ever been before, for a very long time, and the only place to hide is cash. Then you might want to sell.

I cant tell you what to do " but I suggest you read these articles before making any decisions:
1.) Investors Dump Closed End Funds

2.) FiLife Guide to Closed End Funds

3.) Capitulation: When the Market Throws in the Towel

Actually, I have one more Question:Should I sell now and buy CDs, or is it too late?